<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                                   (Mark One)

        (X)     Quarterly Report Pursuant to Section 13 or 15(d)
                of the Securities Exchange Act of 1934.
                For the quarterly period ended September 30, 2001.

        ( )     Transition Report Pursuant to Section 13 or 15(d)
                of the Securities Exchange Act of 1934
                For the transition period from _______ to _______


                          Commission File No: 000-30045

                                  CATUITY INC.
             (Exact Name of Registrant as specified in its charter)

<TABLE>
<S>                                                                        <C>
Delaware                                                                   38-3518829
(State or other jurisdiction of                                            (I.R.S. Employer
incorporation or organization)                                             Identification Number)

2711 E. Jefferson Avenue
Detroit, MI                                                                48207
(Address of principal executive offices)                                   (Zip Code)
</TABLE>

                  Registrant's telephone number, including area code:
                      (313) 567-4348

         Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                Yes ( X ) No ( )

Indicate the number of shares outstanding of the each issuer's classes of stock
as of the latest practical date:
Common stock outstanding - 7,915,619 shares as of October 31, 2001

<PAGE>
                                     INDEX

                                 CATUITY INC.

<TABLE>
<S>                                                                                                   <C>
                                                                                                        PAGE
Part 1. Financial Information                                                                            NO.

   Item 1.   Financial Statements (Unaudited)

             Consolidated balance sheets - September 30, 2001 and December 31, 2000                       3

             Consolidated statements of operations - Three months ended                                   4
             September 30, 2001 and 2000; Nine months ended
             September 30, 2001 and 2000

             Consolidated statements of cash flows - Nine months ended                                    5
             September 30, 2001 and 2000

             Notes to consolidated financial statements - September 30, 2001                              6

   Item 2.   Management's Discussion and Analysis of Financial                                           10
             Condition and Results of Operations

   Item 3.   Quantitative and Qualitative Disclosure of Market Risk                                      15

Part II.     Other Information                                                                           16

   Item 1.   Legal Proceedings                                                                           16

   Item 2    Changes In Securities and Use of Proceeds                                                   16

   Item 4.   Submission of Matters to a Vote of Security Holders                                         16

   Item 6.   Exhibits and Reports on Form 8-K                                                            16

Signatures                                                                                               17
</TABLE>



                                                                               2

<PAGE>

Part I.  FINANCIAL INFORMATION

ITEM 1   FINANCIAL STATEMENTS

                                  CATUITY INC.
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                            SEPTEMBER 30, 2001       DECEMBER 31, 2000
                                                       ------------------------ -----------------------
                                                                   (UNAUDITED)
<S>                                                       <C>                       <C>
                       ASSETS
                       ------
Current Assets:
  Cash and cash equivalents                                         $4,144,706              $8,558,843
  Accounts receivable, less allowance of $40,000                       260,722                 111,698
     at September 30, 2001 and $44,000 at
     December 31, 2000
   Restricted cash                                                     335,512                 222,265
   Prepaid expenses and other                                          549,904                 370,357
                                                       ------------------------ -----------------------
Total current assets                                                 5,290,844               9,263,163
  Property and equipment, net                                          211,948                 236,832
                                                       ------------------------ -----------------------
Total assets                                                        $5,502,792              $9,499,995
                                                       ======================== =======================

            LIABILITIES AND STOCKHOLDERS'
            -----------------------------
                       EQUITY
                       ------
Current Liabilities:
  Accounts payable                                                    $181,755                $378,982
  Deferred revenue                                                      33,602                  67,000
  Accrued compensation                                                 141,578                 122,134
  Other accrued expenses                                               787,954                 483,406
  Trust liability                                                      318,996                 204,243
                                                       ------------------------ -----------------------
Total current liabilities                                            1,463,885               1,255,765

Accrued compensation                                                    49,920                  50,231

Stockholders' equity:
   Common stock - $.001 par value                                        7,913                   7,870
    Authorized - 100 million shares
    Issued and outstanding - 7,912,619 at
    September 30, 2001 and 7,869,619 at
    December 31, 2000
  Additional paid-in capital                                        31,955,245              32,626,916
  Shareholder loans                                                  (757,733)               (757,733)
  Foreign currency translation                                       (335,303)               (265,066)
  Accumulated deficit                                             (26,881,135)            (23,417,988)
                                                       ------------------------ -----------------------
Total stockholders' equity                                           4,038,907               8,244,230
                                                       ------------------------ -----------------------
Total liabilities and stockholders' equity                          $5,502,792              $9,499,995
                                                       ======================== =======================
</TABLE>

See accompanying notes.

                                                                               3

<PAGE>


                                  CATUITY INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED                   NINE MONTHS ENDED
                                                     SEPTEMBER 30                          SEPTEMBER 30
                                          ---------------------------------- ------------------------------------
                                               2001              2000               2001              2000
                                          --------------- ------------------ ------------------ -----------------

<S>                                       <C>               <C>               <C>                 <C>
 Revenues:
 Software development revenue                 $449,425           $307,000           $558,653           $504,000
 Service revenue                                25,925             39,061            225,672             95,661
                                          --------------- ------------------ ------------------ -----------------
 Gross revenues                                475,350            346,061            784,325            599,661

 Operating costs and expenses:
 Product development                           301,740            473,273            854,162            990,366
 Customer implementation & support             270,325             36,663            728,698            130,593
 Sales and marketing                           360,781            280,296          1,464,338          1,108,012
 General and administrative                    733,084            493,648          2,234,612          1,174,503
 General and administrative -
 Variable stock compensation                  (305,874)            (6,033)          (801,671)          (220,956)
                                          --------------- ------------------ ------------------ -----------------
 Total operating costs and expenses          1,360,056          1,277,847          4,480,139          3,182,518
                                          --------------- ------------------ ------------------ -----------------

 Operating loss                               (884,706)          (931,786)        (3,695,814)        (2,582,857)
                                          --------------- ------------------ ------------------ -----------------

 Other income/(expense):
 Interest income                                52,385             48,774            232,667            157,694
 Interest expense - related party                   --                 --                 --            (46,766)
                                          --------------- ------------------ ------------------ -----------------
 Total other income/(expense)                   52,385             48,774            232,667            110,928
                                          --------------- ------------------ ------------------ -----------------

 Loss before taxes                            (832,321)          (883,012)        (3,463,147)        (2,471,929)
 Provision for income taxes                         --                 --                 --                 --
                                          --------------- ------------------ ------------------ -----------------
 Loss before extraordinary items              (832,321)          (883,012)        (3,463,147)        (2,471,929)
 Extraordinary loss on early
 extinguishment of debt                             --           (127,446)                --           (127,446)
                                          --------------- ------------------ ------------------ -----------------
 Net loss                                    $(832,321)       $(1,010,458)       $(3,463,147)       $(2,599,375)
                                          =============== ================== ================== =================


 Loss per share before
 Extraordinary items - basic & diluted          $(0.11)            $(0.12)            $(0.44)            $(0.36)
 Loss per share - extraordinary
 items - basic & diluted                            --              (0.02)                --              (0.02)
                                          --------------- ------------------ ------------------ -----------------
 Net loss per share-basic & diluted             $(0.11)            $(0.14)            $(0.44)            $(0.38)
 Weighted average shares
 Outstanding-basic & diluted                 7,909,489          7,125,055          7,893,496          6,870,816
</TABLE>

See accompanying notes.

                                                                             4
<PAGE>
                                 CATUITY INC.
                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                 NINE MONTHS ENDED
                                                                                   SEPTEMBER 30
                                                                         ----------------------------------
                                                                              2001              2000
                                                                         ---------------- -----------------
<S>                                                                      <C>                 <C>
Cash flows from operating activities:
Net loss                                                                   $(3,463,147)       $(2,599,375)

Adjustments used to reconcile net loss to net cash
used in operating activities:
Stock based compensation                                                      (801,671)          (220,956)
Depreciation and amortization                                                   75,639             93,276
Non-cash services                                                               69,800                 --
Extraordinary loss on early extinguishment of debt                                  --            127,446
Changes in assets and liabilities:
   Accounts receivable                                                        (149,024)           274,187
   Other assets                                                               (292,794)          (131,828)
   Accounts payable                                                           (197,227)          (363,419)
   Accrued expenses and other liabilities                                      405,038            127,260
                                                                         ---------------- -----------------
Net cash used in operating activities                                       (4,353,386)        (2,693,409)
                                                                         ---------------- -----------------

Cash flows from investing activities:
   Purchase of property and equipment                                          (50,755)           (71,557)
                                                                         ---------------- -----------------
Net cash used in investing activities                                          (50,755)           (71,557)
                                                                         ---------------- -----------------

Cash flows from financing activities:
   Payments on borrowings                                                           --           (854,230)
   Issuance of common stock, net of expenses                                    60,241          1,946,222
   Net Proceeds from sale of option                                                 --            924,805
   Fees paid for early extinguishment of debt                                       --           (127,446)
                                                                         ---------------- -----------------
Net cash provided by financing activities                                       60,241          1,889,351
                                                                         ---------------- -----------------

Foreign exchange effect on cash                                                (70,237)          (791,772)
                                                                         ---------------- -----------------
Net decrease in cash and cash equivalents                                   (4,414,137)        (1,667,387)
Cash and cash equivalents, beginning of period                               8,558,843          5,269,757
                                                                         ---------------- -----------------
Cash and cash equivalents, end of period                                   $ 4,144,706        $ 3,602,370
                                                                         ================ =================
</TABLE>





                                                                             5

<PAGE>


                                  CATUITY INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                         SEPTEMBER 30, 2001 (UNAUDITED)



1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Catuity Inc.
(the "Company") have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine months period ended
September 30, 2001 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2001. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 2000.

Certain prior year amounts have been reclassified to conform with the current
year presentation.

The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the United
States for complete financial statements.




                                                                               6
<PAGE>
                                  CATUITY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



2. LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per
share for the three and nine months ended September 30, 2001 and 2000.

<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED                           NINE MONTHS ENDED
                                         SEPTEMBER 30                                 SEPTEMBER 30
                               2001                     2000                  2001                  2000
                          ---------------- ---- ---------------------- -------------------- ---------------------
<S>                         <C>                    <C>                  <C>                  <C>
Numerator:
   Net loss                     $(832,321)            $(1,010,458)         $(3,463,147)         $(2,599,375)
   Extraordinary items -
     loss or early
     extinguishment of
     debt                              --               (127,446)                    --             (127,446)
                          ---------------------------------------------------------------------------------------
Loss before
extraordinary items             $(832,321)             $(883,012)           $(3,463,147)         $(2,471,929)
Denominator:
   Denominator for
     basic and diluted
     loss per share -
     weighted average
     shares outstanding         7,909,489              7,125,055              7,893,496            6,870,816
   Loss per share
     before
     extraordinary
     items - basic &
     diluted                      $(0.11)                $(0.12)                $(0.44)              $(0.36)
   Loss per share -
     extraordinary
     items basic &
     diluted                       --                     (0.02)                 --                   (0.02)
                          ---------------------------------------------------------------------------------------
   Basic and diluted
     net loss per share           $(0.11)                $(0.14)                $(0.44)              $(0.38)
                          =======================================================================================

</TABLE>



                                                                               7
<PAGE>



                                  CATUITY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



3. COMPREHENSIVE LOSS

Total comprehensive loss is summarized as follows:

<TABLE>
<CAPTION>
                                     THREE MONTHS ENDED                     NINE MONTHS ENDED
                                        SEPTEMBER 30                           SEPTEMBER 30
                                 2001                  2000              2001               2000

<S>                             <C>                 <C>               <C>                <C>
Net loss                         $(832,321)          $(1,010,458)      $(3,463,147)       $(2,599,375)
   Foreign currency
   translation                       6,108              (356,062)          (70,237)          (728,746)
                           ------------------    ----------------- ------------------ ------------------

Total comprehensive
   loss                          $(826,213)          $(1,366,520)      $(3,533,384)       $(3,328,121)
                                 ==========          ============      ============       ============
</TABLE>

4. LEGAL PROCEEDINGS

           On May 17, 2001, the judge in the Federal Court of Australia issued
           his judgment in the patent infringement lawsuit that Welcome Real
           Time (WRT), a French company and competitor to Catuity, had filed
           against Catuity in July 2000 in Australia related to the Transcard
           system and Catuity system. The judge ruled that the WRT patent was
           valid and that Catuity infringed on the patent in Australia. Catuity
           and its attorneys continue to believe that the Catuity software does
           not infringe on the WRT patent and have filed an appeal of the
           ruling.

           On July 24, 2001, the court ordered Catuity to refrain from
           infringing on the patent in Australia and to deliver any infringing
           physical devices in its possession in Australia to its attorneys by
           October 17, 2001 related to the Transcard system and Catuity system.
           Catuity and its Transcard customers had previously decided to
           terminate the Transcard system trial operations and, effective August
           31, 2001, Catuity and Transcard ceased operating the Transcard
           system. The cessation of Transcard activities has not had a material
           impact on Catuity's operating results. Year-to-date revenues from the
           Transcard system were $32,000 as of August 31, 2001 when the system
           was discontinued. The judge also ordered that WRT was entitled to
           damages suffered or, at its option, a measure of profitability made
           by Catuity of its operations in Australia. Catuity provided on
           September 17, 2001, a summary of financial information concerning its
           and its subsidiaries operations in Australia. The judge also ruled
           that Catuity pay certain of WRT's legal costs to date. The estimated
           amount of cost that Catuity may have to pay has been provided



                                                                               8

<PAGE>



                                  CATUITY INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


          for. In the three month period ended September 30, 2001, the Company
          recorded an additional provision of approximately $100,000 for legal
          expense related to the WRT lawsuit, in order to provide for its best
          estimate of all remaining costs associated with the patent
          infringement lawsuit as of September 30, 2001. This includes the cost
          of the Company's appeal and estimated costs in the event the appeal is
          unsuccessful. As of November 14, 2001 neither the costs nor the
          damages have been determined or finalized and the amount of these
          costs may not be finalized until the first quarter 2002. In the event
          the Company's appeal is successful, the Company may not have to pay
          these costs and may recover its own costs.



                                                                               9

<PAGE>


                                  CATUITY INC.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

GENERAL

Catuity develops, licenses and supports customer loyalty and incentive program
software that enables retailers, product suppliers and credit card issuing banks
to establish and administer customer incentive and loyalty programs that are
completely customizable to meet their unique needs. The Catuity system functions
in both the internet (e-commerce) and in-store environments using existing
magnetic stripe cards and or smart cards.

Third quarter 2001 revenue increased to $475,000 from $164,000 in the three
month period ended June 30, 2001, an increase of 190%, and increased 37% over
the $346,000 recorded in the three month period ended September 30, 2000.

The net loss for the three month period ended September 30, 2001 was $832,000 as
compared to a loss of $1,010,000 for the three month period ended September 30,
2000, an improvement of $178,000. The primary reasons for this difference are as
follows:


     -    An increase in customer implementation and support costs as the
          Company installed more systems and supported more customers.

     -    A decrease in product development costs due primarily to software
          development outsourced in 2000 and the positive effect of the change
          in the exchange rate between the Australian dollar compared to the
          U.S. dollar. The average exchange rate was .5756 in the third quarter
          2000 compared to .5144 in the third quarter 2001.

     -    An increase in general and administrative expenses of approximately
          $239,000 relating to increased salary and severance related costs,
          investment banking, consulting and investor relations activities. Of
          the approximate $239,000 increase, approximately $70,000 represented
          non-cash services expense.

     -    An increase in the non-cash credit related to variable stock
          compensation of approximately $300,000 due to a decrease in the
          Company's share price during the three month period ended September
          30, 2001.

     -    Approximately $127,000 of expense relating to costs incurred for the
          early extinguishment of debt during the three month period ending
          September 30, 2000.



                                                                              10

<PAGE>

                                  CATUITY INC.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)


In October 2001, the Company signed a multi-year Software Development and Cross
License Agreement (the "Agreement") with Visa USA. Under the Agreement, the
Company will license its technology to Visa USA and complete significant
development efforts on its loyalty system to meet Visa specifications for its
use of the software with smart cards. The Company also received a royalty-free
license from Visa to market the revised software to merchants and to Visa member
banks world-wide. As part of the Agreement, the Company will also receive
license fees based on the number of smart Visa cards utilizing loyalty programs.
The Agreement is expected to generate approximately $4.0 million in gross
revenue for the Company in 2001 and 2002, with the likelihood of additional
gross revenues in 2002 and thereafter.

The Company expects fourth quarter gross revenues to be approximately $1,100,000
due primarily to on-going software development efforts that will continue into
2002. It also expects to have positive cash flow for the fourth quarter of 2001.
Gross revenue for 2002 is expected to increase significantly over 2001 gross
revenue and the Company expects to earn a modest profit in 2002 before non-cash
adjustments for stock warrants and stock compensation. The Company is currently
completing its strategic plan and budget for 2002 and expects to release
additional information regarding 2001 by the middle of December.

For further information regarding the Company's market and product refer to the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.

REVENUE

Revenue for the three month period ended September 30, 2001 increased 37% to
$475,000 in 2001 from $346,000 in 2000. The increase was primarily due to
increased software development and modification revenue from customers earned
in the quarter.

Revenue in the nine month period ended September 30, 2001 increased to $784,000
from $600,000 in the nine month period ended September 30, 2000. In 2001,
approximately $559,000 of revenue was related to software development activities
for U.S. customers, while an additional $179,000 was related to service revenues
for installation, training and maintenance efforts on behalf of U.S. customers.
During the nine month period ended September 30, 2000, approximately $504,000 of
revenue was related to software development activities for U.S. customers.
Australian based service revenue decreased to $46,000 in the nine month period
ended September 30, 2001 from $96,000 in the nine month period ended September
30, 2000.



                                                                              11

<PAGE>


                                  CATUITY INC.




ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)

PRODUCT DEVELOPMENT

Product development expenses primarily consist of the costs associated with the
Company's software development team in Sydney, Australia. For the three month
period ended September 30, costs decreased 36% to $302,000 in 2001 from $473,000
in 2000. The principal source of the decrease relates to outside software
development costs of $133,000 recorded in the three month period ended September
30, 2000 that were not incurred in 2001.

For the nine month period ended September 30, costs decreased 14% to $854,000 in
2001 from $990,000 in 2000. The principal reason for the nine month decrease is
consistent with the three month period decrease. In addition, favorable movement
in the exchange rate between the U.S. and Australian dollar lowered the
company's relative cost in the nine month period ended September 30, 2001.

CUSTOMER IMPLEMENTATION AND SUPPORT

Customer implementation and support expenses consist of the costs associated
with the Company's customer implementation and support staff and facilities
located in Arlington, Virginia. For the three month period ended September 30,
costs increased from $37,000 in 2000 to $270,000 in 2001. During the third
quarter of 2000, the Company's U.S. activities were primarily concentrated on
sales and marketing efforts, and establishing its headquarters, while the
customer implementation and support staff and facilities were still in the
process of becoming established. In addition, customer service and support
activities for the three month period ended September 30, 2001 increased over
the same period in 2000 and are expected to continue to increase as the Company
implements new systems and supports new customers.

For the nine month period ended September 30, costs increased from $131,000 in
2000 to $729,000 in 2001. The principal reasons for the nine month increase are
consistent with the three month period increase.

SALES AND MARKETING

For the three month period ended September 30, sales and marketing costs
increased 29% from $280,000 in 2000 to $361,000 in 2001. The increase of $81,000
relates primarily to increased salaries and marketing expenses associated with
sales and sales support efforts.


                                                                              12

<PAGE>


                                  CATUITY INC.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)

Sales and marketing expenses increased 32% from $1,108,000 in the nine month
period ended September 30, 2000 to $1,464,000 in 2001. The principal reasons for
the nine month period increase are consistent with the three month period
increase.


GENERAL AND ADMINISTRATIVE

General and administrative expenses include costs related to executive,
financial and administrative personnel, outside professional services, patents
and intellectual property defense including court actions, facilities and other
general corporate overhead. Expenses for the three month period ended September
30, 2001 were $733,000 compared to $494,000 in the same period in 2000. The
increase of $239,000 (48%) relates primarily to increased expenses for
investment banking, investor relation activities, increased salary and severance
costs and consulting expenses.

For the nine month period ended September 30, general and administrative costs
increased from $1,175,000 in 2000 to $2,235,000 in 2001. The principal reason
for the increase in the nine month period relates to expenses and provisions for
future expenses of approximately $700,000 associated with the company's patent
infringement lawsuit. The remaining increase for the nine month period is
consistent with the three month period increase.

STOCK COMPENSATION

Stock compensation is a non-cash expense/(credit) that results from a
non-recourse loan awarded prior to 1998 to an executive in order to purchase
stock. The non-recourse loan is treated as a variable award and variable
accounting has been adopted. The expense/(credit) recorded each period is
dependent on movements in the Company's price per share. For the three month
period ended September 30, 2001, a credit of $306,000 was recorded due to
downward movement in the Company's stock price since June 30, 2001. In the same
period in 2000, a credit of $6,000 was recorded.

For the nine month period ended September 30, 2001 a credit of $802,000 was
recorded due to downward movement in the Company's stock price since December
31, 2000. In the same period in 2000, a credit of $221,000 was recorded.

OTHER INCOME (EXPENSE)

Interest income increased by $3,000, from $49,000 for the three month period
ended September 30, 2000 to $52,000 in 2001. Interest income was essentially
flat between the periods because of lower interest rates in 2001 on higher
invested cash balances.

Interest expense decreased by approximately $47,000 for the nine month period
ended September 30, 2001. The principal reason for the decrease, is due to the
Company exercising its option to repay its long term debt in full in July 2000.
The Company paid an additional $127,000 to repay the debt early and recorded
this extraordinary loss during the three and nine months ended September 30,
2000.


                                                                              13

<PAGE>

                                  CATUITY INC.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)


LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2001, the company had $4,145,000 in cash and cash
equivalents, compared to $8,559,000 at December 31, 2000.

Net cash used in operating activities was $4,353,000 for the nine month period
ended September 30, 2001 compared with $2,693,000 for the nine month period
ended September 30, 2000. The approximately $1,660,000 change in cash use
relates primarily to the increased costs associated with the U.S. based
operations that were established in 2001 but were in the process of being
established in the nine month period ended September 30, 2000.

During the nine month period ended September 30, 2001 the Australian dollar
weakened against the U.S. dollar. This resulted in a negative foreign currency
effect on cash of approximately $70,000.

The Company believes that its existing capital resources combined with collected
revenues from signed contracts are adequate to meet its cash requirements for
the next twelve months.



                                                                              14

<PAGE>


                                CATUITY INC.

FORWARD LOOKING INFORMATION

The Management Discussion and Analysis of Financial Condition and Results of
Operations includes "forward-looking" statements within the meaning of the
Private Securities Litigation Act of 1995. This Act provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information about themselves so long as they identify these statements as
forward-looking and provide meaningful cautionary statements identifying
important factors that could cause actual results to differ from the expected
results. All statements other than statements of historical fact made in this
Form 10-Q are forward looking. In some cases, they can be identified by
terminology such as "may," "will," "should," "expect," " plan," "anticipate,"
"believe," "estimate," "predict," "potential," or "continue," the negative of
such terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially. In evaluating these
statements, you should consider various factors that may cause our actual
results to differ materially from any forward-looking statements.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee our future results, levels of
activity, performance or achievement. Moreover, neither we nor any other person
assumes liability for the accuracy and completeness of the forward-looking
statements. Various factors may cause actual performance to differ from any of
the forward-looking statements contained in the Management Discussion and
Analysis of Financial Condition and Results of Operations. These include, but
are not limited to, the timing and overall level of smart card acceptance in the
United States, changes in the United States economy affecting business
conditions, the speed with which our customers decide to proceed with loyalty
programs and the timing with which they implement their plans, decisions in the
WRT legal proceedings and the timing of the decisions. We are under no duty to
update any of the forward-looking statements after the date of this filing to
conform such statements to actual results or to changes in our expectations.


ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.


The Company is exposed to foreign currency exchange rate risk inherent in its
revenues, expenses, assets and liabilities denominated in the Australian dollar.
To date, the Company has not utilized any foreign currency hedging or other
derivative instruments to reduce exchange rate risk. The Company does not expect
to employ these or other strategies to hedge the risk in the foreseeable future.

As of September 30, 2001 and 2000 the Company's net current assets (defined as
current assets less current liabilities) subject to foreign currency risk were
$360,000 and $2,848,000. The potential decrease in net assets from a
hypothetical 10% adverse change in quoted foreign currency exchange rates would
be approximately $36,000 and $285,000.

The Company is also exposed to interest rate risk on its investment portfolio,
which is affected by changes in the general level of interest rates in the
United States and Australia. Since the Company generally invests in very
short-term interest bearing deposits, it does not believe it is subject to any
material market risk exposure.




                                                                              15

<PAGE>

                                CATUITY INC.



                           PART II OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

See notes to financial statements

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

On May 1, 2001 the Company entered into an agreement with Greenstone Partners
Inc. whereby the Company agreed to issue shares of common stock and options to
purchase shares of common stock in exchange for Greenstone's investor relations
services. Under the terms of the agreement, Greenstone received the following in
the three month period ended September 30, 2001:

1.   A total of 9,000 Catuity shares of common stock, vesting at the rate of
3,000 shares per month. During the period, the company recorded investor
relations expense of $29,000 related to the issuance of the shares.

2.   The option to purchase 25,000 shares of the Company's common stock at $4.00
per share between August 1, 2001 and May 1, 2004 unless the agreement is
terminated prior to its completion. During the period, the company recorded
related investor relations expense of $41,000.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  None


ITEM 6.    EXHIBITS AND REPORT ON FORM 8-K

           (a)    Exhibit           Description

                   10.2(cc)         Executive Services Agreement between
                                    Catuity Inc. and David Machattie Smith
                                    dated June 1, 2001 and executed September
                                    10, 2001.

                   99.2             Catuity Inc. Audit Committee charter as
                                    amended October 22, 2001.

           (b)    Reports on Form 8-K

                  None



                                                                            16

<PAGE>







                                CATUITY INC.




                           SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                           By:   /s/ Michael V. Howe
                                 -------------------
                                 Michael V. Howe
                                 President and Chief Executive Officer


                           By:   /s/ John H. Lowry
                                 -----------------
                                 John H. Lowry
                                 Chief Financial Officer


Date: November 12, 2001





                                                                              17





<PAGE>


                                EXHIBIT INDEX
                                -------------

Exhibit        Description
-------        -----------

10.2(cc)       Executive Services Agreement between Catuity Inc. and David
               Machattie Smith dated June 1, 2001 and executed September 10,
               2001.

99.2           Catuity Inc. Audit Committee charter as amended.